Trending News: The Markets Are Crashing - Here's What You Need To Know

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Long Story

After a bad ending to last week, markets took major hits this morning. Dips in the Asian markets wiped out a year's worth of gains and the aftershocks hit both European and American markets hard.

Long Story Short

North American markets are feeling the pain after China’s Shanghai Composite Index rumbled through its biggest nosedive since 2007. It dropped a startling 8.5 per cent at 3209 points, evaporating an entire year’s worth of gains.

In response, after plunging 1000 points shortly after opening, the Dow Jones is stabilizing. On Bay Street, the TSX initially lost more than 600 points. It promises to be a long and jittery day of trading on North American markets.

The Financial Times Stock Exchance (FTSE), which keeps tabs on the 100 companies with the highest market capitalization on the London Stock Exchange, closed down 4.67 per cent, one of the top 24 biggest daily falls since 1984 according to RBS Economics. The FTSeurofirst300 finished down 5.4 per cent, its lowest level this year.

Elsewhere, as the wheels came off the Shanghai Composite, the Hang Seng Index in Hong Kong responded with a loss of 5.2 per cent at 21251.57 points, its lowest level since March 2014. Japan’s Nikkei tanked 4.6 per cent, it’s biggest one-day decline since June 2013. The Australian market experienced its biggest one-day fall in six years, down 213.2 points.

All of this represents billions of dollars wiped off world financial markets, never a good thing.

The US Federal Reserve was expected to boost interest rates in September but now there are suggestions the Fed may be forced to ease monetary policy, instead.

China’s central bank helped spark market woes with a surprise devaluation two weeks ago. There are signs a global economic slowdown may be imminent, but there are also signs the current situation is different from the one back in 1994.

Many blame the Chinese devaluation of the yuan 21 years ago for the market crisis that followed. Conditions surrounding China’s surprise devaluation August 11th are different mainly because Asian economies are in a better position to weather any storm with stronger account balances and foreign exchange reserves.

Many analysts believe China may be the only central bank with enough firepower to reverse this worrisome trend. It has about 25 trillion yuan of bank deposits locked up and with its benchmark one-year interest rate at 4.85 per cent, the Peoples Bank of China appears to have an effective monetary policy arsenal handy.

Still, Marc Faber, editor of the “Gloom, Boom and Doom Report” believes the economic situation in China is actually worse than the government makes it out to be. He suggests China has been losing steam for the last three years, sparking weaknesses in the price of copper, gold, crude oil and other commodities.

If you're going to blame Obama for the decline of the market, you'll need to give him credit for it more than doubling. #BlackMonday

Nick Dixon suggests everyone sit tight and ride out the volatility, even if, as he puts it, “you can’t actually enjoy the journey.” Dixon, Investment Director at the life insurance and pension firm Aegon UK, doesn’t believe savers should be too alarmed about the market selloff.

At the other extreme, Damian McBride, a former adviser to Gordon Brown, the UK Prime minister during the 2007-2008 crisis, offered this advice in the first of a rather alarmist series of tweets, “get hard cash in a safe place now.”

In a tweet of his own, US presidential hopeful Donald Trump says the market crash is “caused by poor planning and allowing China and Asia to dictate the agenda”. For people wondering how to fix it, he ended the tweet with the suggestion “Vote Trump.”

Markets are crashing - all caused by poor planning and allowing China and Asia to dictate the agenda. This could get very messy! Vote Trump.

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